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Johnson's Russia List


August 27, 1997  
This Date's Issues: 1151 1152 

Johnson's Russia List
27 August 1997

[Note from David Johnson:
1. Reuter: Russia must begin to invest in production--analyst.
2. Zavtra: Nemtsov's Sexual Mores Expected To Be Impugned.
(DJ: Consume at own risk).

3. Zavtra: Soros Shuns Approach by Banker, Possibly Berezovskiy.
4. Alan Fahnestock: Paul Tatum.
5. H. M. Hubey: Re Dyer/Blood and Oil.
6. Henrietta Thomas: Response to Smetannikov/Russian land.
7. John Varoli (RFE/RL): Russia: Which Ancient Capital Was The 
Hearth Of The Nation's Soul?


9. Reuter: Boiko says Russian selloff dangerous but necessary.
10. Moskovskaya Pravda: Andrey Kolesnikov, "Maksim Boyko As Mirror 
of Russian Privatization."

11. Newsweek: Bill Powell and Owen Matthews, Moscow on the Make.
12. Tel Aviv's Yedi'ot Aharonot: Senior Russian Officials Said 
Involved in Lerner Case.

13. Rossiyskaya Gazeta: U.S. Embassy Worst Traffic Offender Among 
Moscow Missions.

14. Journal of Commerce: Ariel Cohen, Privatization soap opera.
15. ZDNet Russia to Debut in September .]


Russia must begin to invest in production--analyst

LPBACH, Austria, Aug 26 (Reuter) - Russia must begin to invest in production
capacity and stop living off the sale of its vast resources if economic
transformation there is to progress, a leading economist said on Tuesday. 
Peter Hawlik, an analyst at the Vienna Institute for Comparative Economic
Studies, said the Russian economy was only half of what it was before the
collapse of the Soviet Union and warned of the consequences of regional
"The key problem I see for the Russian the fact that so far,
Russia has been living from its enormous assets," 
Hawlik said at the European Forum in the Austrian resort of Alpbach. 
"It is a very rich country, it has great export potential but unfortunately
this is not a sustainable situation. The key for future development is
investment into productive assets," he added. 
In mid-August President Boris Yeltsin said Russia had reached political
stability. With a period of crises over, the next stage of reform -- economic
growth -- was waiting its turn, Yeltsin said. 
The Russian economy shrank about five percent in 1996 and ministers say gross
domestic product could fall up to two percent again this year, but there are
signs of growth in the economy already. 
However, many important reforms such as a new tax code are still on the
drawing board, largely due to resistance from Russia's opposition-dominated
Hawlik said that a recent crisis in the Czech Republic, for example, showed
how fragile the process of reform could be. 
"Many of the problems in the finanical sector, the banking sector, which
exist in Russia are similar to those that we observed in Bulgaria, the Czech
Republic and I would warn against over-extended optimism," Hawlik said. 


Nemtsov's Sexual Mores Expected To Be Impugned 

Zavtra, No. 33
August 1997
[translation for personal use only]
Untitled report by the Den Security Service under the "Bulletin
Board" rubric

The influence being exerted by a group of bankers
(Berezovskiy-Gusinskiy) on [Russian President Boris] Yeltsin's family, as
was noted in an analytical report by a foreign embassy in Moscow, should
lead to closer ties between [First Deputy Premier Anatoliy] Chubays and
[Premier Viktor] Chernomyrdin, particularly in the sphere of disseminating
compromising materials on these bankers for the launching of investigation
procedures. The legislative bodies of the Russian Federation will most
likely be used here. At the same time, it is being certified that a number
of powerful blows could soon be directed at [First Deputy Premier Boris]
Nemtsov, who will be presented as a "homosexual" and "someone who
participated in group sex in Moscow dives." The goal of this compromising
material is to undermine Nemtsov's relations with Yeltsin's family. As we
can see, even dirty tricks like these are fully in keeping with the current
temperaments of the powers that be....


Soros Shuns Approach by Banker, Possibly Berezovskiy 

Zavtra, No. 33
August 1997
[translation for personal use only]
Untitled Report by the Den Security Service under the "Bulletin
Board" rubric"

According to information from New York, multibillionaire [George]
Soros has recently received a certain Russian banker (probably [Boris]
Berezovskiy), who offered him new deals with Russia on condition [that
Soros] break [off ties] with [Uneximbank chief] Potanin. According to the
same sources, this banker proposed a number of projects on transferring the
property rights to oil deposits and Russian oil companies over to financing
by Soros. The latter, however, did not agree to break with Potanin, as a
result of which the meeting ended in a formalization of the hitherto hidden
battle over state property in the Russian Federation.


Date: Tue, 26 Aug 1997 
From: (Alan Fahnestock)
Subject: tatum

With regard to Paul Tatum, RIP:

When Tatum was assassinated, sentiment among my colleagues in Moscow was a
fairly uniform "So? What took them so long?". While he may have been an
astute businessman initially, for the last couple of years of his life he
tried to beat the Russians at their own game --- roughly the equivalent of
roller-blading wrongway down Interstate 95 at night, dressed in black and
with his eyes closed. The people he worked with (not to say his partners in
the Slavyanskaya, necessarily) put up with him as long as he was useful, then
got rid of him by the only apparently expedient means: full of hubris and
having grown enamored of the quasi-Mafia lifestyle, he wasn't about to leave
quietly like a good little Westerner.

This doesn't justify assassination, and I'm all for his estate receiving its
rightful share of the swag if their case can be proven, but I can't see
lionizing a gentleman who played "chicken" with a whole community while
adopting many of its less savory aspects. This is not a martyr to economic
reformation, but a functional suicide. In Sicily he wouldn't have lasted a


Date: Tue, 26 Aug 1997
From: "H. M. Hubey" <> 
Subject: Re: 1149-Dyer/Blood and Oil

>August 26, 1997
>Blood and oil 
> And the third pipeline? That will probably follow the route of the
>second across Georgia to the Black Sea, as a compromise between the
>politically fraught Russian route and the very costly Turkish route. But
>one way or another, the oil will get out.

This is a very short-sighted and narrow-minded view, as we would
say a temporally and spatially local view. A global view reveals
something much more important.

First, Russian gas will be sold to Israel and this pipeline will
have to go thorugh Turkey and it will follow a north-south route.

Secondly, there is a gas pipeline being built from Iran to Ankara
and that will go through east to west. It goes north to Erzerum
from Iran and then to Ankara. Erzerum is about equal distance
from Azerbaijan as from the Georgian coast. So if there is
peace between Armenia and Azerbaijan, the pipeline can go through
Armenia right to Erzerum; if not a pipeline can go from the Georgian
Black Sea coast to Erzerum. In any case, Turkey might want it
not to go through Armenia until some political problems are

Thirdly, Turkey will be selling water to Israel, and it will
probably want to build a water pipeline from the large dams
which are a part of its Southeast Anatolia Project (GAP). As it is
Istanbul has water problems, and in the future, water from the 
GAP dams maybe taken by tanker to Istanbul if needed. Who knows,
it might decide to sell water to parched North Africa during the
next century. If there is no pipeline to carry water to the
Mediterranean ports, it is useless to store up all the water if
it is not going to be all used for irrigation in southeastern
Turkey. Incidentally, the fact that Turkish dams will be holding
up and using water which as a result will not go to Iraq and Syria
is probably a very good reason for Syrian and Iraqi support for the PKK.

Fourthly, Eastern Europe (or Western Europe) does not want
to be dependent only on the Russian pipeline. So there is an
agreement between Turkey and Ukraine to pipe Mideastern oil to the 
Black Sea coast so that that requires yet another north-south

Fifthly, the Bosphorus is already a congested waterway, and
the cost of tanker collision and oil spills are very high.
So Turkey is restricting tanker traffic via the Bosphorus. That
means that even a pipeline through Russia to the Black Sea
coast might require a north-south Turkish pipeline.

Building a pipeline requires overhead costs such as building
new access roads, digging trenches, tunnels etc. If these
costs can be shared by several pipelines (such as water,
oil, and gas) then the costs per pipeline drop. Since under all
circumstances there are lots of calls for north-south pipelines accross
Turkey, in the long run the least costly alternative will probably
turn out to be via Turkey.


Date: Tue, 26 Aug 1997 
From: Henrietta Thomas <> 
Subject: Response to Smetannikov/Russian land

At 11:48 AM 8/26/97 -0400, Max Smetannikov wrote:
>Russia, as odd as it may sound, can be a land of 
>opportunity for folks from some overpopulated neighboring countries.

Instinct #1: That's what Herr Hitler said. He wanted Russia for his

Instinct #2: The neighboring countries are mostly former Soviet republics.
Which of them are so overpopulated their people would want to emigrate
to Russia? 

Instinct #3: Millions of Russians are more or less stranded in countries
no longer part of the Soviet Union. Seems to me they should have a first
right of return.

>Since it's no longer a land of Gulags, it has to become the land of 
>open borders. 

The borders already leak like a sieve, with all sorts of illegal
skullduggery going on. Russia would be better advised to establish
better border patrols.

>Making it easy for foreigners to come will soon 
>become a pressing need, so it might be about time for Russian 
>precedency 2000 forerunners to face the fact the choices on the 
>immigration front had already been made for them ten years ago. 
>Russian immigration laws are bound to be changed.

Russia already has 100 different nationalities within its borders.
There are tensions between these various ethnic groups. And you would
add "foreigners" to the mix? I think it should be a very long time
for anything like that to happen. Let the Russians have Russia to
themselves; the land does not belong to the rest of the world.

Final note: Those who think there is a vast Russian land on which to
resettle their people should bear in mind that most of the land is
uninhabitable, and only about 10% is truly arable. That's why the
right to buy and sell land is not such a great idea.


Russia: Which Ancient Capital Was The Hearth Of The Nation's Soul?
By John Varoli

St. Petersburg, 26 August 1997 (RFE/RL) -- Where was the true capital -- the
hearth of the soul -- of ancient Russia? 
The usual contenders are Novgorod, located three hours south of St.
Petersburg, and Kiev in the Ukraine. But now, with an eminent archeologist
in its corner, St. Petersburg -- the seat of Czar Peter the Great -- has
emerged as a challenger. 
Anything connected to Russia's national identity nowadays is a political
event that the country's leaders eagerly sign up for. So, last week, the
archeologist, Professor Anatoly Kirpichnikov of the Russian Academy of
Sciences, found himself flanked by leading politicians from the Leningrad
He told reporters about 25 years of excavations at Staraya Ladoga and
talked about the origins of the Russian state. Among Russian academics and
intellectuals, few things arouse such passions. 
Archeological discoveries in the Leningrad region at Staraya Ladoga can
only intensify the debates. Staraya Ladoga was a key commercial city-state
from the eighth century to the 10th. It stood on the trade routes to
Byzantium and other parts of the Middle East. 
The prize is big -- nothing less than the title of capital of ancient
Russia. But, Professor Kirpichnikov says he has enough evidence to believe
that it was the center of political power in ancient Russia during the 8th
and 9th centuries. Only later, he says, did the capital move to Novgorod and
"In Staraya Ladoga, Russia saw the dawn of its state and urban
civilization. The city was a center before the Vikings came," he says. 
Kirpichnikov says that the Rurichovich dynasty established itself in
Russia there in 862. The Rurichovichi, Vikings in origin, were Russia's
ruling house from the 9th century until the dynasty ended with the death of
Ivan the Terrible in 1584. 
At a press conference Kirpichnikov displayed some of the latest finds,
the most interesting of which were rare examples of ancient Scandinavian and
Slavic jewelry. He said that the specimens found weren't made merely by
village craftsmen, and that they are artifacts meeting the highest standards
of the time. 
The professor's description of life in Staraya Ladoga 1000 years ago
should make sweet music in the ears of today's reformers in the Kremlin. 
"It was a free society and a commercial city-state. We might say it was a
free economic zone that attracted merchants from throughout the Baltic Sea
civilization," he says. 
A lack of of funding for restoration at Staraya Ladoga, and the crumbling
state of many other historical sights in the Leningrad region was a sore
topic at the press conference. As if to underscore the current Russian
government's frustrations without an official ideology and searching for a
national identity, Vitali Klimov, the chief deputy governor of the Leningrad
region, wrapped up the press conference on a philosophical note with the
"Recently, we've lost that which always had united us -- our
spirituality, which is based on our historical and cultural heritage. When
we succeed in getting back our historical roots, we will once again obtain
that spirituality. Then we will probably find that it will be much easier to
solve some of our more pressing everyday problems."


MALOSOLOV) -- Russia has "the most law-obedient army," believes
chairman of the trade union of servicemen of Russia`s Armed
Forces Oleg Shvedkov. That`s why he is sceptical of a coup
predicted by several opposition movements.
At the same time he acknowledged in an interview with a RIA
NOVOSTI correspondent that the planned reduction of the Armed
Forces personnel may give birth to tension in the army. Many
retired officers "will face serious problems of social
adaptation after the retirement, the search for a new job and
housing." The uncertainty regarding the terms and methods of the
planned reduction, "about which nobody informs servicemen of the
middle-rank and junior officers," adds additional nervousness.
According to Shvedkov, the trade union of Russia`s
servicemen has addressed the top-ranking military officials with
several initiatives in order to bring down the social tension in
the forces. In particular, it was proposed to convene an
All-Army forum with the participation of the president and
generals who "would dot all "i`s" regarding the plans on the
reform of the army and to create a state program of adaptation
of former servicemen." 


Boiko says Russian selloff dangerous but necessary
By Lynnley Browning 

MOSCOW, Aug 26 (Reuter) - Russia's new privatisation chief said in an
interview published on Tuesday that history's biggest property sell-off had
been a dangerous operation but he hinted compromises had been needed to
ensure the reforms succeeded. 
Maxim Boiko, a reformist Harvard-trained economist, was appointed last month
to lead Russia's sell-off into a new era after a rash of privatisation
scandals. He told the respected Izvestia daily in one of his first interviews
that the state had not done the best job of transferring enterprises to
private hands. 
But Boiko defended Russia's record against charges that controversial
auctions, which awarded large stakes in prime companies to inside winners at
bargain-basement prices, had not been legal or fair. 
``Privatisation is a conflict-ridden, dangerous thing,'' said 37-year-old
``It's another matter to discuss whether this was the best means of
privatisation,'' he said, referring to the shares-for-loans scheme, the most
controversial, and soon-to-close, stage in Russia's privatisation programme. 
``I remind you that shares for loans auctions were in 1995, when the economic
and political situation was fundamentally different.'' 
Boiko is a former aide to First Deputy Prime Minister Anatoly Chubais, the
markets-or-bust reformist who is the architect of Russia's privatisation
He worked with Chubais in 1992 in the early years of change, when Chubais
sought to transfer state property to private hands as quickly as possible to
prevent Communists from derailing reform and returning Russia to a planned
Shares-for-loans helped Russian banks become powerhouses when Moscow awarded
them state stakes in key firms in exchange for cheap loans to the government.
The banks then bought the stakes permanently at sales which precluded other
Such sales of some of Russia's best companies, including the Norilsk Nickel
metals group and top oil producers YUKOS and Surgut, made Russia's budding
new capitalists, most prominently Uneximbank, empires overnight. 
But the sales also helped the government at a time when it desperately needed
money to plug the deficit and to fend off attacks from resurgent
conservatives intent on killing reforms. 
When asked what kind of property manager the state had been, Boiko said,
``Not at all effective,'' citing the vast number of enterprises to be
privatised. But he said the government had done the right thing by selling
off the enterprises it could. 
Very few shares-for-loans stakes remain to be auctioned, and Boiko sounded
the death knell for the scheme by saying it would not be continued for new
That signals a major change in Russia's privatisation programme -- a change
which Boiko said may have motivated unknown entities which stand to lose in
the new era to organise the contract killing of a top privatisation official.
``This murder is a challenge...from those who don't want honest
privatisation,'' he said. 
St Petersburg's privatisation chief, Mikhail Manevich, was gunned down last
week in the middle of Russia's former imperial capital by a sniper in what
officials say is a contract killing. 
The murder came just as Russia's privatisation programme, which the
government hopes will involve 60 companies in 1998, is at a crossroads, and
Boiko cautioned that what he called further abuses in the organisation of
property sales could occur. 
In another sign of a struggle for control over privatisation, Russia earlier
this week postponed the auction of a controlling stake in the Eastern Oil
The prospect of change was already made clear in July, when Moscow sold the
Svyazinvest telecoms holding for $1.875 billion in a sale billed as one of
Russia's few free, fair auctions. 
The sale ignited an unprecedented campaign of criticism against the winners
by Russian media controlled by losers in the sale. 
But Boiko said he felt no pressure from lobbies, adding, ``Not a single
banker called me during my first week in the job.'' 


State Property Committee's Maksim Boyko Profiled 

Moskovskaya Pravda
August 20, 1997
[translation for personal use only]
Report by Andrey Kolesnikov: "Maksim Boyko As Mirror of Russian

No Revolution has occurred at the State Property Committee [GKI]: One
member of the Chubays team has been knocked out of the game and has been
replaced by another as GKI head.
The members of the Chubays team are mostly boys from good families or,
on the contrary, talented folks "from the people." Anatoliy Borisovich
himself, for example, comes from an ordinary serviceman's family. Alfred
Kokh comes from a family of Russian Germans and was born in a classical
place for exiled settlers -- Eastern Kazakhstan -- and has been accustomed
to a Spartan atmosphere since childhood.
The biography of new GKI head, Maksim Boyko, is different. He comes
from a family of "professors." His father is a Doctor of Economics, and
his mother a Candidate of Science. Maksim Boyko's great-grandfather,
Aleksey Lazovskiy, was an old Bolshevik; he was repressed in 1952.
The molding of the man who would become GKI chairman followed the
traditional path for a gifted boy from an elite family: A specialized
English-language school, graduation from and postgraduate studies at MFTI
[Moscow Physico-Technical Institute], a Candidate's degree in economics,
IMEMO [Institute of World Economy and International Relations], and
advanced training at the national Bureau of Economic Research of the United
States [as published]. Boyko coauthored a book that came out in the West,
"Privatization in Russia," which is one of the first serious studies on the
initial stage of privatization.
From the very beginning of the liberal reform, Maksim Boyko was among
the main drafters and ideologists of Russia's privatization program. In
1992 he became chief economic adviser to the GKI chairman; in 1993, general
director of the Russian Privatization Center (RTsP). (The latter
subsequently prepared the first deal on Svyazinvest, but the deal broke
down in 1995.) After Chubays was dismissed in 1996, Boyko gave refuge in a
tiny office to the then disgraced man, now first deputy premier. In 1995
Boyko worked as executive secretary for Chubays's main
administrative-ideological headquarters: the government's Commission for
Economic Reform.
On 1 July 1996, Boyko left his post as RTsP head. The official had
decided to go into business. However, by 1 August, the ex- privatization
official was already in a spacious office in the Kremlin's building no. 14
in a new capacity: as deputy head of the presidential staff for work with
parties, public associations, and the mass media. Until recently, the
so-called presidential staff for ideology, which has been the subject of so
much talk in the press and which determined the basic political strategy
not only for the presidential staff, but, to some extent, also for the
government, would gather in Boyko's office.
During the spring reshuffles in the cabinet of ministers, Chubays
lobbied for Boyko's candidacy for the post of leader of the government
apparatus. However, Viktor Chernomyrdin did not agree with this -- such an
obvious strengthening of the Chubays wing in the government would have been
totally unacceptable for him. Vladimir Babichev remained in his post, but
another member of the Chubays team, Sergey Vasilyev, became his deputy. 
Vasilyev is still in control of the passage of all economic documents of
the [Russian] White House.
By appointing Boyko to the post of GKI chairman, the government saved
Alfred Kokh from a blow. His ties with Uneximbank had made it impossible
for him to retain responsible posts in the cabinet of ministers. However,
the president and the government were absolutely sincere when they
expressed gratitude to him -- the auctions [he had organized] replenished
the [state] budget with hard cash. In fact, Kokh has sacrificed himself.
T hus, the professional and personnel balance has been preserved with
Kokh's resignation. Boyko, 37, who is also a member of the Chubays team,
is a highly skilled privatizer. So the general policy of transferring
state property to private hands is unlikely to change. It is another
matter that auctioning strategy will now be oriented toward the new law on
privatization. The era of old law and old normative acts has come to an
end with the resignation of Alfred Kokh....


1 September 1997
[for personal use only]
Moscow on the Make
By Bill Powell and Owen Matthews

It's 3 a.m. on a warm summer night, and scores of young revelers pour onto
a riverbank from a clutch of neighboring nightclubs. Some of the kids are
drunk; some are stoned; some flirt; some just lie back and look at the night
sky. They are relaxed, casual. The setting could be any European capital. But
this is a riverbank called Raushskaya, just across from Red Square, the
center and soul of the city of Moscow.
During the decades of communism, Moscow meant gray, lifeless, oppression;
it meant waiting in long lines for stores with empty shelves; it meant tapped
telephones and KGB informants. It seemed like a city that did everything it
could to live up to being the capital of the Evil Empire. Since communism's
demise six years ago, it has come to conjure up very different images: mob
hits, murdered businessmen, a Parliament building shelled by Russia's own
army; filthy-rich robber barons partying and spending wildly.
Those images are real enough. There is an edge--a wildness and a
decadence--to life in Moscow at the end of the 20th century. But the images
are also incomplete--and not very revealing about the sort of place Russia's
capital has become. They conflict with scenes like the one on the embankment,
images that are enticingly hopeful about a country struggling to reinvent
Next month Moscow and its ambitious mayor, Yuri Luzhkov, are going to
throw a huge party. Pavarotti will sing in Red Square, and James Brown will
be there, too. For the first time since the 1980 Olympics, old buildings are
being sandblasted to reveal an elegance jarringly at odds with the city's
dreary image. The occasion of the $40 million blowout is the 850th
anniversary of the city's founding. But if the number doesn't seem much more
significant than 849 or 851, it doesn't mean there isn't cause for
celebration. After all, when the 800th anniversary was celebrated, Joseph
Stalin sat in the Kremlin. The manufactured celebration this year has
everything to do with Luzhkov's ambition to succeed the man who governs
Russia today. But the mayor's stated reason for inviting the world to his
city should not be dismissed. It is, he says, to celebrate Moscow's emergence
as a "normal, civilized capital."
That's a bit premature. But what separates Moscow from the rest of Russia
today is the hope that it can be normal, particularly among the young, for
whom the cold war is just another chapter in a history book. As Julia
Koroleva, a 30-year-old who left for Los Angeles in 1991 and returned this
year to work in a public-relations firm, puts it, "There's something new in
the air here... a sense that all the past has really been shed, that we are
no longer crippled by the heavy weight our parents carried."
Russia's capital today bursts with as much manic capitalistic energy as
Tokyo or New York or London. It's no secret that there is fabulous wealth in
the New Moscow; six of the world's 500 richest people live there, according
to Forbes. More important, the massive capital flight that has plagued Russia
since 1991 is reversing. Switzerland last year became the leading foreign
investor in Russia, and that only confirmed the obvious: a lot of Russian
money is coming home. The reason for that is simple. In Moscow, as in any
other center of capitalism, the making of money attracts more money. In the
first six months of this year, Moscow's stock market doubled in value, and
that followed a 130 percent gain in 1996. The average daily trading volume
has risen from $2.3 million to $43.3 million in just two years.
Not just speculators and oligarchs are reaping the dividends. Aleksandr K,
25, is one of a growing number of young professionals doing well--and doing
so within the law. (Concerned about shakedowns, he doesn't want his name
revealed.) He is a broker for a major Russian securities company, earns
$60,000 a year, vacations in Europe with his young wife and is saving to buy
an apartment in the center of town. "People of my age with brains don't have
to go into criminal, shady business," he says. "There's a normal career
ladder now, which you climb if you are smart, not because you have
[Communist] Party connections or because you killed someone."
Moscow is now the only city in Russia with a rapidly growing middle class.
Car ownership in Moscow is up to more than 3 million from 700,000 in 1991.
Mayor Luzhkov has used the city's relatively flush tax rolls to fund a
massive public-works binge. The city's signature project is the Christ the
Savior Cathedral. A 15-story marble edifice, it is topped with a giant onion
dome made with 110 pounds of solid gold. It sits on the same site as the
original Christ the Savior Church, which Stalin dynamited in 1931. The Manezh
Square next to the Kremlin has been transformed into an underground shopping
mall. The once dilapidated facades of Tverskaya, the city's main street, have
turned into a golden mile of expensive, Western-style stores and five-star
hotels. Donald Trump is shopping for property near Red Square.
But the city's revitalization has also bred a kind of decadence that
dwarfs that of any other European capital. Where there were fewer than 10
nightclubs three years ago, there are now more than 300, and the number is
rising steadily. At the crowded Hungry Duck, bartenders serve four free shots
of tequila for every one ordered; by midnight, people are dancing topless on
the bar. At the Up and Down Club, "businessmen" may pay $350 just to get in,
then choose from among stunning women, some of whom command $500 an hour. At
the Moscow Palace of Youth, 1,000 rave-happy youngsters dance till 6 in the
morning to pumping techno in a giant Brezhnev-era auditorium built for the
Young Communist League. In the clubs, everything from marijuana to Ecstasy is
Although the rate of violent crime has begun to dip, the mafia remains an
obnoxiously visible force, ever-present just behind the tinted windows of the
Mercedes that just drove past. Crime doesn't seem like a journalistic cliche
when you step out of a theater during the Moscow Film Festival, round a
corner and walk into the immediate aftermath of a double homicide. Most
businesses in Moscow continue to pay protection money. They have what's known
as a mafia krysha, or "roof."
Mayor Luzhkov's critics say he sets a harsh tone through official
ruthlessness. The mayor's "sweeps" to rid the streets of the homeless and
those without permits to live in the city are notorious. Inspectors pay
special attention to dark-skinned residents who have moved to Moscow from the
Caucasus, say his detractors. They must pay small bribes to gain their
freedom. Authorities have done little to check gangs who terrorize families
into giving up valuable apartments near the center of the city. For the weak,
mere survival remains a desperate struggle. Peddlers try to sell
battery-powered trinkets to commuters crammed onto a train. An elderly woman
walks silently through a railway car displaying a bundle of the votive
candles that Russian believers burn in church. It could be the Third World.
Most ironic, perhaps, is classic exploitation of the kind Marx railed
against 150 years ago. The 800 seamstresses at Shirt Factory No. 5 have had
their monthly wages frozen at $53. Many are single mothers who came to Moscow
on the promise of a residence permit and an apartment in return for 10 years'
labor. "The management wants us to work eight hours a day for slave-labor
wages, and threatens to throw us on the street if we quit," says Lena Tsyval,
33, who has worked at the factory since 1985. "They know that if they force
us out they'll be able to sell off the apartments and make a profit."
Still, for all its painfully sharp edges, Moscow is the only place in
Russia where the promise of the post-communist revolution is at all visible.
The youngsters on the embankment every weekend aren't mafiosi, nor are they
the "golden youth" generation of children of Communist Party apparatchiks.
They are ordinary middle-class youngsters enjoying the first breath of
Moscow's newfound prosperity. They buy Rollerblades and laptop computers.
They order out for pizza. They go to a Moscow club after work and have a few
beers. They will, no doubt, snap up the Russian version of London's weekly
entertainment-and-arts guide Time Out when it's unveiled this fall.
In most places these things are unremarkable. Not here. The word in
Russian is normalnost--"normalcy." The young people in Moscow have it today
in a way their parents could not ever imagine, and many are beginning to
believe things will only get better. "Daily life is not a humiliation
anymore" is how Julia Koroleva, the 30-year-old returnee, puts it. There is
enormous hope in that phrase. Hope enough, in fact, to justify one hell of an
anniversary party.
With Lindsay Loudon and Brian Humphreys


Senior Russian Officials Said Involved in Lerner Case 

Tel Aviv Yedi'ot Aharonot in Hebrew
August 25, 1997
[translation for personal use only]
Report by envoy in Moscow Shlomo Abramovich

"Senior officers in the Russian Interior Ministry have prevented the
transfer of information in the Grigoriy Lerner affair because they feared
Lerner would divulge embarrassing information on associates of President
Boris Yeltsin and on one of his potential heirs."
This information was provided by a man who was privy to Lerner's
financial activities in Russia during 1993-94. Yedi'ot Aharonot has also
learned that these officers have hidden from Russian Interior Minister
Anatoliy Kulikov information and documents confiscated during Lerner's
interrogation in Israel; the information was turned over to the Russian
police officer who came to Israel.
Among the documents was a letter written by Lerner in which he wrote
that several senior Russian bankers should be "bribed." A source in
Moscow's district attorney's office said the information in this letter
could embarrass persons who are close to the senior Russian echelon.
One of the officers who prevented the transfer of the information, a
general, was dismissed from his post by Russian Interior Minister Kulikov. 
Kulikov was extremely angry when he heard from Public Security Minister
Avigdor Qahalani that several Russian officers have taken "vacation" on the
very same day in which Chief Superintendent Me'ir Gilbo'a, deputy commander
of the Israel Police Criminal Investigations Department, arrived in Russia.
The dismissed general was the commander of the vacationing officers,
who also took with them information which was supposed to be handed over to
Gilbo'a prior to the discussion of the Lerner case in the Israeli High
Court of Justice.
After the Russian interior minister personally intervened, Gilbo'a and
Deputy Commander Aharon Tal, the Israel Police representative in Russia,
were given many documents in Russian which provide new information.
The person who was involved in Lerner's financial activities also said
that the key to understanding the delays in transferring the information to
the Israel Police lies in a list of names of associates of one of the
candidates to inherit Yeltsin's post. These associates have invested tens
of millions of black dollars in one of Lerner's accounts that served as a
funnel for transferring a fortune to a bank he purchased in Cyprus.
The sources of these funds were deals for the sale of fuel and the
purchase of sugar for all the residents of Russia. No taxes were paid on
these deals. The source estimates that the unpaid taxes for the sugar deal
alone amounted to approximately $80 million.


U.S. Embassy Worst Traffic Offender Among Moscow Missions 

Rossiyskaya Gazeta
August 23, 1997
[translation for personal use only]
ITAR-TASS report: "You Must Be Answerable, Messrs. Diplomats.
All Is Not Well With Car Driving by U.S. Diplomats in Moscow, Nor
With Road Transport Discipline"

The cup of Moscow's patience was caused to overflow by an incident
that happened 18 August, in which a U.S. diplomat was involved. While
driving an Isuzu Trooper car, license number 004D210, near house No. 13 on
Parfenov Street in the evening, Matthew Bryza, second secretary at the U.S.
Embassy in the Russian Federation, knocked down a woman who was crossing
the street at a designated place. As a result, she received a fracture at
the base of the skull and was taken to hospital in a coma. At present the
casualty is still in a grave condition.
Valeriy Nesterushkin, official spokesman for the Russian Federation
Ministry of Foreign Affairs, has reported that the U.S. Embassy in Moscow
has been handed a letter from the Moscow Internal Affairs Main
Administration Investigative Administration asking Bryza to turn up to
testify to the essence of what happened or to submit such a testimony in
written form.
On 20 August, however, by decision of the Department of State, Matthew
Bryza interrupted his tour of duty and was recalled from Moscow. He is now
in the United States. The U.S. Embassy has been notified that Bryza's
departure does not close the matter. At the end of the investigation the
U.S. Department of State will be informed of its results, and, if Bryza's
guilt is established, we will insist that appropriate measures be taken
against him, despite his departure from Russia. Of course, the right to
material and moral damages in favor of the victim and her family also
Valeriy Nesterushkin pointed out that, according to the Moscow State
Automobile Inspectorate's data, staffers of the U.S. Embassy in Moscow
committed 141 violations of the Road Traffic Regulations between 1 January
and 18 August. This is the highest indicator among the diplomatic missions
in Moscow. The U.S. Embassy accounts for 14 percent of all violations
committed in the city by diplomats from more than 140 embassies. This
attests to the poor road transport discipline of U.S. Embassy staffers. 
The Russian Ministry of Foreign Affairs has repeatedly informed the embassy
of these facts and noted with concern the growth of this negative trend. 
"We most earnestly request the leadership of the U.S. Embassy in Moscow to
urgently take all measures to rectify the situation," the Russian diplomat
Meanwhile.... [subhead]
James Rubin, official spokesman for the U.S. Department of State, has
declared that the decision to recall Matthew Bryza from Moscow was made in
connection with the fact that the diplomat "is no longer able to work
efficiently in Moscow because of this incident."
"We have absolutely no grounds for believing that the diplomat was in
a state of alcoholic intoxication," Rubin pointed out. "He has not been
known to violate the Road Traffic Regulations before." On Monday 18 August
Bryza was traveling with his wife after engaging in sport and, according to
him, was driving the car at a speed of 24 km per hour. Rubin expressed
regret at the tragic incident. He reported that the U.S. diplomat had
answered the policemen's questions. The Russian authorities are continuing
to investigate what happened.


Journal of Commerce
27 August 1997
[for personal use only]
Guest Opinion
Privatization soap opera
Ariel Cohen is senior policy analyst at the Heritage Foundation. He 
often advises Western companies on doing business in Russia. 

The biggest scandal today in Russia is the highly publicized spat 
between First Vice Premiers Anatoly Chubais and Boris Nemtsov on the one 
hand, and two banking and media groups led by Vladimir Gusinsky and 
Deputy Secretary of the National Security Council Boris Berezovsky on 
the other.
The scandal marks the collapse of the coalition between powerful 
financial interests and reformer politicians who were crucial in 
securing President Yeltsin's victory in last year's election.
The brawl started when Mr. Berezovsky and Mr. Gusinsky lost out on the 
highly lucrative acquisition of the 25% interest in the national phone 
company, Sviazivest. The deal, worth $1.7 billion, went to the 
Oneksimbank group led by the former First Deputy Prime Minister Vladimir 
Potanin and backed by the American financier, George Soros.
The acquiring entity was a Cyprus-registered consortium created 
specifically to bid for Sviazinvest. Two weeks later, Oneksimbank also 
acquired 38% of the highly lucrative Norilsk Nickel plant.
This was done under the controversial "loans-for-shares" deal which 
Oneksimbank and other banks carved out for themselves in 1995. Under 
this arrangement, Russian banks extended credits to the government in 
exchange for state-owned shares which the government had no intention of 
buying back.
Because Mr. Berezovsky and Mr. Gusinsky control two of Russia's most 
important TV channels (Ostankino/ORT and MTV) and a number of 
influential newspapers (Segodnya, Nezavisimaya Gazeta), this issue 
received extensive media coverage.
Leading government decision makers were depicted as corrupt, as was the 
outcome of the bidding process. As a result of the publicity, Alfred 
Kokh. deputy prime minister in charge of privatization and the head of 
the State Property Commission, resigned and was replaced by Maxim Boyko, 
one of the closest allies of Antoly Chubais.
Of course, when Mr. Berezovsky, et al, succeeded in acquiring lucrative 
pieces of state property, such as Aeroflot Russian airlines, ORT 
national television, Sibneft oil company and others, their media outlets 
were silent.
Mr. Gusinsky and Mr. Berezovsky, who claimed credit for Boris Yeltsin's 
presidential victory, are pointing their fingers at the leader of the 
reformers' team, Mr. Chubais, calling him a "traitor." Mr. Chubais fired 
back, saying "the whole might of the state machine will be used against 
The Svyazinvest deal, indeed, raises important questions as to the 
transparency of the bidding procedures in Russia. First, the main 
winner, Mr. Potanin, left government service only in the March cabinet 
reshuffle, and had direct involvement in major economic and business 
policy issues before that. 
The winning consortium was a Cyprus-registered company, with unclear 
sources of funds and no previous experience in telecommunications -- or 
any other business. Mr. Soros' participation in the bid was announced 
only after the deal went to Oneksimbank.
The primary significance of the Sviazinvest scandal is the unraveling of 
the coalition between several leading bankers -- with Mr. Potanin, Mr. 
Berezovsky and Mr. Gusinsky being the most prominent among them -- and 
the group of reformist politicians led by Mr. Chubais and Mr. Nemtsov.
Mr. Potanin now emerges as the leading financier of the Yeltsin group, 
while Mr. Berezovsky and Mr. Gusinsky may have to look for new political 
The presidential elections of the year 2000 will provide the losers in 
the current struggle (so far, Mr. Berezovsky and Mr. Gusinsky) an 
opportunity to pick a new favorite.
The most likely presidential candidate for them may be Prime Minister 
Chernomyrdin or the ambitious Moscow mayor Yuriy M. Luzhkov, who was 
previously closely connected with Mr. Gusinsky. Mr. Luzhkov is also a 
sworn enemy of Antol Chubais.
However, if a serious challenge is launched by either the communists or 
another leading candidate, and these bankers feel threatened, they may 
well return to the Nemtsov -- Chubais camp.
The Russian soap opera blending business with politics is likely to 
continue, hurting the flow of Western investment that has been pouring 
into Russia since last March when Mr. Yeltsin returned from his long 
leave of absence and installed the Chubais-Nemtsov team to lead the 
country's economic reform.
Still, the latest fight has a positive side to it. The clash in Moscow 
demonstrates to both Russians and Westerners the need for good corporate 
governance and transparency in privatization that many experts have been 
calling for.
And when the Russian rich and famous are fighting over corporate control 
-- and not over the very survival of democracy and free markets -- one 
realizes how much progress Russia has achieved in the last five years. 


Cowles/Simba Media Daily 8/26/97
ZDNet Russia to Debut in September 

ZDNet (, online publishing division of Ziff-Davis, 
has partnered with Russian content provider the ACC Group to launch 
ZDNet Russia in September at Compaq and St. 
Petersburg-based Relcom are the main sponsors of the venture, which is 
only the latest of ZDNet's localized service launches; others include 
Germany, Australia and China. 

The Russian site will provide local and international news -- which 
users can have delivered to their e-mail boxes -- a database of the 
country's significant companies and individuals, downloadable software 
and product reviews, all geared toward the business audience. 



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